Yesterday saw the Commonwealth Bank (CBA) reach a fresh all-time high, less than 1% below the psychological $100 level and while I’m sorry to cover the banks again I know virtually all of MM’s subscribers have significant exposure to the sector hence its important you are fully across our view towards the ASX’s most influential sector – the “Big Four” make up over 20% of the index with CBA the markets largest stock. When Australia’s most influential group is up +24% year-to-date, even after paying healthy dividends, it’s not surprising the ASX200 is holding onto its 2021 gains like a limpet to a boats hull.
The Australian Banking Index remains well below its 2015 all-time high even though CBA scaled fresh heights yesterday, on the sector level we remain bullish both fundamentally and technically although a pullback similar to the one in Q3 of last year wouldn’t surprise.
Fundamentally – bond yields are climbing helping the banks increase margins while bad debts are well under levels feared during COVID plus of course property is booming which helps on all fronts.
Technically – a test of the sectors all-time high wouldn’t surprise hence we question whether some catch up by the lagging regionals is on the cards i.e. as trends mature investors often search for areas perceived to be relatively cheap.
